\u3000\u3000 Shandong Linglong Tyre Co.Ltd(601966) (601966)
Event:
On January 29, 2022, Shandong Linglong Tyre Co.Ltd(601966) issued the announcement of annual performance reduction in 2021: it is expected that the net profit attributable to shareholders of Listed Companies in 2021 will be 880 million yuan to 1.1 billion yuan, a decrease of 1.12 billion yuan to 1.34 billion yuan compared with the same period of last year, a year-on-year decrease of 50% to 60%. The net profit attributable to the parent company after deduction is expected to be 750 million yuan to 950 million yuan, a decrease of 1.14 billion yuan to 1.34 billion yuan compared with the same period of last year, a year-on-year decrease of 54% to 64%.
Key investment points:
The performance of 2021q4 is still declining month on month, which is consistent with the industry trend
According to the forecast information, the net profit attributable to shareholders of Listed Companies in the single quarter of 2021q4 was - 50 million yuan to 170 million yuan, with a median of 60 million yuan, a decrease of 62.5% from 160 million yuan in 2021q3 and 90.3% from 620 million yuan in 2020q4. The net profit attributable to the parent company after deducting non-profit in 2021q4 was - 70 million yuan to 130 million yuan, with a median of 30 million yuan, a decrease of 78.4% compared with 139 million yuan in 2021q3 and 94.9% compared with 592 million yuan in 2020q4. In 2021, Q4 company's performance continued to decline and close to loss. We believe that it is mainly due to the month on month increase in the price of raw materials in 2021q4 and the continuous increase in freight from Thailand to Europe and the United States. At the same time, it also reflects the huge pressure currently faced by the whole tire industry. From the situation that the annual performance forecast of 2021 has been disclosed, the performance of Shandong Linglong Tyre Co.Ltd(601966) is basically consistent with the trend of the industry. The net profits of Gui Zhou Tyre Co.Ltd(000589) , Aeolus Tyre Co.Ltd(600469) , Jiangsu General Science Technology Co.Ltd(601500) , Qingdao Doublestar Co.Ltd(000599) and other companies after non deduction of Q4 in 2021 all fell month on month, and the operation of the whole Chinese tire industry is still deteriorating.
Rising raw materials and shipping costs are the main factors
The pre reduction of the company's performance in 2021 is mainly due to the decrease of the company's overall gross profit margin.
On the one hand, the cost of raw materials rose sharply in 2021. The main raw materials of the company's tire products have increased by varying degrees. The increase in the procurement cost of main raw materials directly leads to the significant increase in the company's product cost, which has varying degrees of impact on the supporting end and retail end, and the gross profit margin has decreased.
On the other hand, the rise of shipping costs in 2021 affected the price adjustment of export products and reduced the gross profit of overseas sales. In 2021, the shipping was extremely tight and the freight rate continued to rise, which greatly increased the cost of overseas customers and restrained the enthusiasm of customers to purchase goods. Therefore, the price adjustment range of the company's export products was limited, resulting in the decline of gross profit margin.
In 2021q4, the cost of comprehensive raw materials still rises sharply, and the company's performance is under pressure
In 2021, the price of bulk chemicals rose sharply due to multiple factors such as double carbon policy and double control of energy consumption. The main raw materials of the company's tire products have increased by varying degrees. At the retail end, the company conducts cost pressure to a certain extent through timely price adjustment; At the supporting end, due to the large absolute quantity and relatively large proportion of the company's supporting, there is a lag in the transmission of tire prices to the main engine plant. Therefore, the rise of raw material costs brings relatively greater pressure on the company's performance.
In 2021, the average price of natural rubber was 13480.41 yuan / ton, a year-on-year increase of + 17.43%; CIS polybutadiene rubber 13205.21 yuan / ton, a year-on-year increase of + 43.99%; Styrene butadiene rubber 13337.12 yuan / ton, a year-on-year increase of + 37.20%; Cord fabric 29329.00 yuan / ton, a year-on-year increase of + 53.83%; Carbon black was 8162.60 yuan / ton, a year-on-year increase of + 47.02%; Accelerator 26055.98 yuan / ton, a year-on-year increase of + 29.64%; Antioxidant 16015.40 yuan / ton, a year-on-year increase of + 20.05%. In Q4 of 2021, the average price of natural rubber was 13680.43 yuan / ton, with a year-on-year increase of + 0.68% and a month on month increase of + 6.40%; CIS polybutadiene rubber 14771.20 yuan / ton, up + 40.26% year on year and + 8.08% month on month; Styrene butadiene rubber 13304.35 yuan / ton, year-on-year + 17.06%, month on month + 0.43%; Cord fabric 30270.16 yuan / ton, year-on-year + 46.25%, month on month -0.41%; Carbon black was 9079.03 yuan / ton, with a year-on-year increase of + 31.17% and a month on month increase of + 16.87%; Accelerator 30643.28 yuan / ton, + 33.94% year on year and + 31.65% month on month; Antioxidant 17448.39 yuan / ton, up + 3.11% year on year and + 30.63% month on month.
According to our calculation, the price index of tire raw materials in 2021 was 165.95, up from + 36.96 in 2020; Among them, Q4 in 2021 was 175.98, compared with Q4 + 27.49 in 2020 and Q3 + 14.44 in 2021. As of late January 2022, the price index of tire raw materials was 165.01, and the high price index of tire raw materials fell.
2021q4 sea freight from Thailand to the east of the United States and Europe is still rising
In 2021, the global trade in goods is booming and the demand for centralized transportation is strong. The global epidemic remains the main challenge. The operation efficiency of overseas ports has decreased, the congestion is serious, the container turnover rate has decreased, and the sea freight has continued to rise. Since 2021, the growth rate of shipping demand has been much greater than that of container ship capacity. The growth of transport capacity can not meet the demand of export growth, resulting in short-term supply-demand mismatch, resulting in the shortage of shipping resources, and the container freight rate has been rising. Although the export of the company's tire products is FOB, the sharp rise of shipping charges will affect the price adjustment of export products, Reduce the gross profit margin of the company's overseas sales; On the other hand, the high ocean freight will also suppress the enthusiasm of overseas customers to ask for goods, and have a strong suppression on the company's export volume, thus forming inventory.
By the end of January 2022, the FBX index (Baltic Sea Container Freight Index) from China to western US ports was US $15145 / feu (Note: feu refers to the container with the length of 40 feet as the international unit of measurement), which was 11.05 times higher than that in early 2020; The FBX index from China to Meidong port is US $16986 / feu, which is 6.41 times higher than that in early 2020; The FBX index from China to European ports is US $14578 / feu, which is 7.72 times higher than that in early 2020.
According to our estimation, according to the current data, a 40 foot container can carry half steel tires with a value of US $29700. The corresponding route freight is US $15100 in the west of the United States (accounting for 50.99% of the value), US $17000 in the east of the United States (accounting for 57.19% of the value), and US $14600 in Europe (accounting for 49.09% of the value). The freight rate is 6-11 times higher than that in early 2020.
At the same time, according to tscn data, the average tscn freight rate of 2021q3 from Thailand to East America is US $11158 / feu, and that of 2021q4 is US $15477 / feu, with a chain comparison of + 38.7%. The average value in January 2022 is US $16700 / feu. The epidemic continues to have an adverse impact on the container freight rate in Thailand, which may further aggravate the export pressure of the company's Thai factory.
The output of automobiles and commercial vehicles has begun to increase month on month
In 2021, China's automobile output was 26.528 million, a year-on-year increase of + 7.73%; The output of new energy vehicles was 3.677 million, a year-on-year increase of + 152.54%; The output of commercial vehicles was 4.6602 million tons, a year-on-year increase of - 10.95%; The output of trucks was 4.518 million, a year-on-year increase of - 13.15%.
Among them, in Q4 of 2021, China's automobile output was 7.9825 million, with a year-on-year increase of - 1.06% and a month on month increase of + 38.27%; The output of new energy vehicles was 1.408 million, with a year-on-year increase of + 130.82% and a month on month increase of + 43.53%; The output of commercial vehicles was 1075700, with a year-on-year increase of - 28.06% and a month on month increase of + 25.91%; The output of trucks was 945400, with a year-on-year increase of - 29.41% and a month on month increase of + 28.81%.
We believe that a reversal of performance is in sight
Although the pressure on 2021q4 continues to increase, we believe that Shandong Linglong Tyre Co.Ltd(601966) performance reversal is in sight, based on the following judgment:
1) after two years of construction, the Serbian project is about to be put into operation. Under the condition of high freight charges, the Serbian base will contribute to the performance increment. Due to the shortage of tires in Europe and America caused by sea freight, we think the profit of the Serbian base is worth looking forward to.
2) in the fourth quarter, China's listed tire companies gradually began to lose money. As the cost composition of the tire industry is mainly composed of raw materials, we expect a large number of tire enterprises to lose money to cash flow, followed by the shutdown of large-scale tire enterprises, and the price rise of tires has begun.
3) the policy of stabilizing the economy has gradually increased. We have also observed that the output of commercial vehicles and vehicles in China has begun to reverse, and China's demand will improve in the future. Under the difficult situation of the tire industry, it is difficult for the price of raw materials to remain high; Meanwhile, with the increase of covid-19 epidemic prevention and control measures, the gradual withdrawal of U.S. economic stimulus policy and the strengthening of global shipping congestion control, the sea freight price is expected to be reduced in the future.
Shandong Linglong Tyre Co.Ltd(601966) maintain the resilience of rapid development and increase investment in production, retail, supporting, R & D and other aspects. In 2021, the company announced the construction of two new bases in Shaanxi and Anhui; In terms of retail, the five new and one high-tech strategy was put forward. The small program for C-end consumers was officially launched in August 2021, supporting the new energy vehicle market. From January to June 2021, the delivery of new energy vehicle tires increased by 385% year-on-year. Shandong Linglong Tyre Co.Ltd(601966) as a leading enterprise in the industry, we are optimistic that the company will break through difficulties and continue to grow by taking advantage of the brand advantages, scale advantages, overseas international layout advantages and new retail channel advantages brought by front decoration. The logic for the company to grow into a global tire giant in the medium and long term remains unchanged.
Profit forecast and investment rating: the profit forecast is adjusted according to the company's performance pre reduction announcement. It is estimated that the net profit attributable to the parent company in 2021, 2022 and 2023 will be RMB 1.091 billion, 2.440 billion and 4.075 billion respectively, corresponding to 38, 17 and 10 times of PE. Maintain the "buy" rating by comprehensively considering the company's operation and future development plan.
Risk tips: changes in tariff barrier policies in major markets, covid-19 virus epidemic caused long-term downturn in tire demand, project production failed to meet expectations, original supporting breakthrough was lower than expected, sales growth failed to meet expectations, sharp fluctuations in raw material prices, exchange rates, safe and environmental protection production, product quality accidents, etc.
